Insider's Guide to Energy
The Energy Industry is uniquely evolving as traders are under increasing pressure to manage costs, cash, limits, and risks. The Insider’s Guide to Energy Podcast addresses current and emerging challenges business executives face daily through stories shared from peers and industry experts while covering topics such as innovation, disruptive technologies, and emerging trends.
Insider's Guide to Energy
131 - Towards Delivering 24/7 Clean Energy
In this episode we speak with Toby Ferenczi about how Energy Attributed Certificates are changing the way enterprises and customers buy energy. With policies like 24/7 clean energy, companies are embracing time stamped RECs to radically rethink the way that they buy and use clean energy.
Host: Chris Sass
Additional Reads:
Granular Energy: https://www.granular-energy.com/
Whitepaper on Timestamped RECs: https://www.nordpoolgroup.com/49b69a/globalassets/download-center/whitepaper/whitepaper-may-2023.pdf
Princeton Report on Time-based Attribute Trading and 24/7 Carbon-free Electricity Procurement: https://acee.princeton.edu/24-7/
04:53.23
chrissass
Welcome to insider's guide to energy I'm your host Chris Sass. Johan is off on vacation somewhere in Sweden this week but we're excited to have with us Toby Ferenczi. Toby welcome to the program I am super excited to have you on the show you work for a company called granular energy.
05:02.44
Toby Ferenczi
Great to be here. Thanks so much for having me Chris.
05:10.34
chrissass
I think it makes sense as I always say at the beginning when he shows for you to introduce yourself personally and professionally, so our audience knows who we're talking to today.
05:16.86
Toby Ferenczi
Great sure. Well um, thanks yeah, as you mentioned um I work for a company called granular energy I'm actually the co-founder and Ceo so granular energy is a to startup company. We're still fairly new. We've been going for about nearly two years now we are 22 people ah, spread across Europe and North America and we provide software um for energy utilities and this software enables them to track and manage the flow of renewable energy from generation sources to their customers by helping them to manage. Renewable energy certificates and we're going to dive into what are renewable energy certificates shortly on the podcast and but by doing this. We're actually hoping to change fundamentally how consumers buy energy of of any kind. Um, just my background. So um i. Spent quite a long time in the renewables industry I started out I studied physics I did a ph d in solar energy. Um I worked for general electric for a few years and then I've done. This is now my third energy startup um, ah going back like seven years ago I was doing a demand response startup which was. Optimizing electric vehicles and batteries that company was sold to a big uk utility called ovo energy and it was during my time there I started to think a lot about how renewable energy is certified. How do we? How do consumers choose 1 type of energy over another.
06:50.57
Toby Ferenczi
Um, and that led me to set up a nonprofit called energy tag which is a nonprofit standards body for Timestamped energy certificate. So we'll come to what those are at some point I'm sure. Um and and whilst doing it running this nonprofit. Called energy tag which has has now been handed over led me and my co-founders to come up with granular energy which is sort one of the key pain points when it comes to utilities giving more transparency to their customers over where their energy is coming from and we'll we'll talk about. Like exactly why? That's so important.
07:28.60
chrissass
Um, well awesome. Well welcome to the show. Um in your introduction you imply that consumers have some say or even care where their energy comes from what let's start there because I don't know I I call the power company they turn on my power and I pay a bill So so help me.
07:40.43
Toby Ferenczi
Um, yeah, what totally totally I mean it is um, an interesting concept right? like um, ah how do you choose where your energy has come from right because all the like power. Stations all the generation assets are connected to the same electric grid so you can't physically tell whether the the power flowing into your home or your business um has come from a solar plant or a coal power station. Um, so we'll talk about the mechanism for how consumers make that choice today and how that's evolving. Um, but to your question which I think is a really interesting one which is like why like why choose? Why do you care? Um, and ah for me I think it is an incredibly important consumer choice to enable. I actually think it's probably the most important consumer choice that any of us have is to choose where your energy comes from if you choose any kind of make a decision as a consumer. This is the one you should care about and that's because. We need to accelerate the rate at which we go through the energy transition from a fossil fuel-based system to a clean energy-based system. We also need to electrify everything right? We need to shift all electric vehicles all the vehicles to electric. We need to electrify heating and cooling and industry. Um.
09:11.65
Toby Ferenczi
And so making this choice um and doing so in a way that helps the deployment of new technologies. Um, that take us on that transition is a way to enable everyone right? All organizations all individuals to actually have an impact. And what's really interesting if you look at the um, kind of population of consumers whether they're individuals or um or businesses. Sure not everyone cares, but a ah surprising number of people do um. Ah, you know where I'm from in the Uk. You know a really significant portion of individuals buy green energy from a green energy supplier which we'll we'll talk about what that actually means and then more and more businesses are starting to choose to buy renewable energy as a way of. Reducing their carbon emissions. Their carbon emissions shows up in what's called scope to carbon accounting and 1 of the most effective ways to reduce your carbon footprint is to buy renewable energy. Um, and so this is just becoming increasingly um important as um as a mechanism. But if there's no trusts right? If you don't know that by buying renewable energy. You're making a credible consumer choice and you're actually having a difference. It's making and you know at the end of the day. It's having an impact then then there's no point right? There's you have there has to be the the mechanism to.
10:41.90
Toby Ferenczi
To choose 1 type of energy of another has to be reliable and robust and that's exactly the issue that we are addressing.
10:48.62
chrissass
Now is is this a function of economics. So I'm I'm looking at Green energy because it's cheaper because it's a windy day or a sunny day or is it a function just of save the planet because we don't want global warming and we want to try to you know.
11:04.83
Toby Ferenczi
Um, yeah I think I think I think it it can and it should be a mixture of both right? like um, you know there are renewable energy today is a very.
11:06.45
chrissass
Not have things warm up as quickly. What's what's the driver here for most people.
11:22.43
Toby Ferenczi
Like cheap form of energy range the cheapest form of energy generation of any Kind. So So we shouldn't be paying a premium to access. Ah renewable energy certainly not at certain times of day. There are other times of day right? when renewable energy might be in scarcity. When it might cost a little bit of a premium and that's where we think that thats where were're where we're really getting at is like how can choosing clean energy really send a price signal to incentivize all of those other technologies that we're going to need if we want to get the grid to be become 0 carbon. Um, but you need to have that consumers leading the discussion because governments are moving too slowly right? if you look globally like the we're not on track right now to hit the 1.5 degree climate Targets. Um. Consumers are way out in front. Not all consumers. But the the consumers that care about sustainability are way out in front of of governments on this topic. Um, and it's harnessing that consumer demand that leading edge consumer demand to send the right price signals that's going to drive cost reduction and deployment. These technologies of Scale. That's one of the key tools that we have um in order to like get there faster.
12:41.63
chrissass
So as a bit of a pessimist myself. Um, what? what? I've seen is a bit of wild West So I'm into the energy transition I spent time on this Podcast. We talk to folks all the time and so so what I think is you'll see your energy company. Give you a green offering say hey you know what. And slight Premium. We Want to give you a green offering. You know you? so you guys can feel good and sleep all at night here's your green offering? Um, but I think you alluded to this in your introduction as Well. We don't really know where those electrons are coming from because it goes into the grid and we don't understand that. So. So How does the average consumer or Enterprise for that matter. Make sure that what they're paying for is what they're getting.
13:19.14
Toby Ferenczi
Um, yeah.
13:24.20
Toby Ferenczi
Yeah, totally well there I think we need to back up a little bit and and talk about the basis for all renewable energy contracts all of those green offers. What is it about what they're offering you that allows them to claim that it's green. Um, and so that is actually a system which is a global system. Um generally referred to as the generic time for them are called energy attribute certificates in the us they're commonly known as rex renewable energy certificates. Um in Europe. It's actually part of a. Ah, european legislation a system called guarantees of origin in the Uk where I'm based. They're called rigos but they're all essentially the same type of instrument these energy attribute certificates and the way these instrument these instruments work they they were developed over. Twenty years ago and exist in all developed energy markets around the world and the way they work is each generator as it produces a unit of energy and exports it to the grid. They get a certificate and that certificate is kept. On a centralized registry and these registries are normally they're called all tracking systems as they're they're sometimes called. They're generally operated by either a grid operator or a government authority like a regulator and ah so all of these certificates are are kept by a central authority.
14:53.77
Toby Ferenczi
And then consumers or utilities on behalf of consumers can buy these certificates and claim them against their consumption so you can say that for that Megawatt hour because I have the certificate. My energy has come from that source and because there's a centralized registry run by an authority here. You can be absolutely sure that there's no double counting. No one else has laid claim to the same instrument. So whilst it's not and no one is pretending that it's it's um, physically a physical representation of like electrons in the grid. Um, it is a very reliable accounting system and it's served pretty well for the last twenty years and the demand for these certificates globally has been going up and up because they're the only basis for these green offers that you see from the utilities and they're the only basis for kind of making purchases. Of renewable energy to reduce your scope to carbon emissions which is kind of kind of really important for businesses who want to like assess the who are now required in many places to actually report on their carbon emissions. Um, what's really interesting about the system though is that whilst it's a reliable accounting system. It hasn't changed. Ah, in the last twenty years and it hasn't moved with the the times and the main issue that um, kind of I noticed like going back five years ago and led to this nonprofit is the fact that the certificates are based today on an.
16:24.56
Toby Ferenczi
And your matching process and don't record the time of when the energy was produced. They tell you where the energies come from but they're missing a timestamp telling you when that unit of energy was generated and so that means that ah essentially if you use 10 Megawatt hours ten units of energy in a year and you buy 10 certificates as long as those certificates were produced in the same ah twelve month window as when you consume the energy. You're actually allowed to claim to be a 100 % renewable energy and have 0 carbon emissions right? and and the problem with that is that. Really does not reflect any kind of reality on grids today you can kind of see how it didn't really matter when these systems were set up over twenty years ago because there were no renewables on the grid. So the grid balancing didn't really matter but annual matching and effect what that means is I could buy all of my certificates from a solar farm in June. In the summer and claim to be using that energy at any point in the year including at nighttime in the winter right? and we all know like the sun doesn't shine at night. So it doesn't really make sense. It's and it's causing a lot of concern around accusations of greenwashing. Um. And and it's also not sending an effective price signal to the market because all of the like certificates are valued the same regardless of time of day. So regardless of supply and demand and but but it's simply right? Renewable energy this is the point we're talking about earlier.
17:56.20
Toby Ferenczi
<unk>able energy should be cheap when it's an oversupply and more expensive when it's an undersupply and that's not the case with the current certificate system. So the big idea is to take this these certificate systems which are well-established they're in every market in the world. It's $12000000000 industry today is set to be $100000000000 by 2030 so we're not this isn't small change that's spent on these certificates. Um, and but to take that same certificate system. Add the missing timestamp to those certificates. Um, and then you can use them to say where your energies come from. And a specific 1 hour a half hour period and that has lots of benefits which I'd love to talk about.
18:34.15
chrissass
Yeah, absolutely so so I think you covered in even in our precall I think I mentioned that we had Meredith anguin on the show. You know a while back and she talked about all the a lot of the things that folks did with Rex in North America and how they didn't. Really do what they were designed to do or what people hoped they would do so you came along started this nonprofit you added times stampmps you got a lot of folks to sign up and agree to go do this so. It's's it's pretty well received at this is the problem. So now that I have timestamps and I could say okay, so. This one was actually produced in September and it was during daylight hours so it was probably solar and it probably is green. Um, what do I do with that certificate.
19:17.55
Toby Ferenczi
Yeah, um, that's ah, that's that's a great question. So um, yeah, the um the idea of these timestamped energy certificates. So so first of all, um, the the the way you use them as you say yeah. My energy is coming from this source in this particular hour of day and that just makes if you want means if you want to make a claim that you're consuming energy whether that's because you've got customers that care about sustainability or something you care about. It's a much more reliable. And trustworthy claim because like you know that there was wind being produced. Um at that corresponding time you're linking production to consumption in real-time which didn't and that link didn't exist before um and this is important by the way like just in terms of trust. To the market the irish advertising standards agency recently a few weeks back. Um, they banned suppliers from selling these hundred percent renewable offers based on the old annual matching system. So the system needs to change just from a trust a greenwashing perspective. Um, but what we're really excited about is the fact that um if you these are tradeable instruments right? So so if you have um these tradeable instruments you start to see price formation.
20:47.16
Toby Ferenczi
Right? So the certificates when but lots of renewable energy are available are cheaper and they become more expensive in the hours when there's less renewables around and there's a whole mechanism by which battery storage and flexibility can benefit because you can if you're a battery you can um, ah import. When you import electricity from the grid you can buy renewable energy by buying these certificates and export it. You can reissue new certificates and capture the spread between the low price hours and the high price hours. So there's there's a mechanism for for flexibility and battery storage to actually benefit from the. The the price spread of these things and so when what that means is when you're as a consumer and you make this choice and you say I want to be renewable. Ah renewable powered and I want to be a renewable powered in as many hours as possible you're actually starting to send a real price signal to the market that's helping not only build more renewable energy. But. Actually um, all of these other technologies that we're going to need as well like energy storage and flexibility. Um, and there's lots of ways that these can be further incentivized like you can use them to to incentivize local consumption of green energy. Um, so that you're reducing. Ah, stresses on the grid reduce taking pressure off the transmission system. So there's lots of different problems that you can solve once these certificates are available but the the primary demand right now is coming from big corporates like ah companies like Google and Microsoft who have enormous electricity demand.
22:21.51
Toby Ferenczi
Ah, for their data centers and they really are at pains to show the the environmental impact of this massive. You know, increase in electricity consumption is minimized and so they're really invested in there being a. Solid mechanism to buy renewable energy so they actually have been big supporters of energy tag and um proponents of this concept of what's called Twenty Four seven clean energy and now many corporates and you know even ah organizations like the us federal government have said. What's what are called Twenty Four seven clean energy targets where they're they're trying to show get to a certain level of renewable energy on an hourly basis.
23:04.74
chrissass
So so help me understand this and and this is just you know, simple ignorance here of of how this works so the grids got a base load. So let's say we have some coal plants and some nuclear plants and some other turbine generating some power somewhere because. It's dark. It's wintertime. It's six p m and it's dark and it's cold and we need energy and so there's only so much battery capacity out there today right? So I get that I could play the spread if I had a grid scale battery I could play the spreads there. Um, how does this really get somebody to 24 hours
23:29.94
Toby Ferenczi
Are.
23:39.39
chrissass
Clean energy because the base load is still being produced with hydrocarbons.
23:42.55
Toby Ferenczi
Yeah, absolutely well no that. But that's literally the whole point. It's hard to be twenty four seven clean energy today right? like it. It's.
23:52.48
chrissass
Right? But how how is this changing the market. So what are the economics or what are the driver that I'm not quite catching here. So I get that there's certificates that I can say that hey I bought clean energy and I paid a premium to have this proof that I bought so much premium and Preium Clean energy to premium or maybe not a premium. Maybe it's discount. Whatever Um, but.
24:01.77
Toby Ferenczi
Um, yeah, yeah.
24:09.77
chrissass
How does that change when when there's more demand than supply. So then it goes back to maybe a hydrocarbon or another source. So how does that turn that into 24 hours of clean energy I'm I'm confused.
24:21.81
Toby Ferenczi
so so what the the goals of these companies are to eventually get to twenty four seven clean energy but Google and Microsoft they're not. They're not there today. Their goal is to get there by 2030. So right now what they need. Is a mechanism to see which hours their renewable powers and which hours they're not and so that's why they can't use the old recs because the old traditional wrecks don't carry this temporal information they need these new wrecks to see where they are and then once you. You take a baseline and it's not just Google and Microsoft now that more and more companies interested in in this kind of baselining saying which hours am I have I got renewable energy from my purchases which hours have I got gaps. That's your first step right? And you you are going to move alarm.
25:11.39
chrissass
Focus to get a baseline you say? Okay, there's these 7 hours a day that I still need renewables and I can't prove them there. So what's next step.
25:17.55
Toby Ferenczi
Exactly? Yeah So then then you have the choice right? There's there's several ways you can fill start to gradually fill those gaps one is and this might be the cheapest is to do some demand response to do some load shifting right. Shift your consumption from times when there's generally less renewables on the grid to times when there's more available. Um, and this is and a whole new revenue stream or value stream for demand response that hasn't existed. The second thing as you'd mentioned might be to um, ah if you've got access to a battery or your utility as a battery they can use that battery to to shift load from 1 time to another um and then the other thing is to go source more renewable energy. You know from. Typically generation sources that ah that are better suited to your to your shape to your mismatching right? If you're buying if most of your renewable energy is previously coming from solar then you know go find some wind resources. You know, go find some hydra um to help fill these gaps and that then creates a premium. For those technologies that are able to deliver clean energy when it's actually needed and that's what we really need right? It's not just about adding more and more renewables adding more solar in a place that already has too much solar. Um, we need to create new incentives for these these other technologies.
26:51.12
Toby Ferenczi
Deliver clean energy when and where it's most needed does does that make sense. There's a really good I'm happy to share it in the links. But um, there's ah, a really good um study from Princeton um, Jesse Jenkins's group. Um where they did modeling of the the. Price volatility of these time stampmp energy certificates and then looking at what the potential impact of that could be in terms of investment decisions and and so forth. So we'll we'll share a link to that but looking at like how this actually translates into real world benefits.
27:25.37
chrissass
And then with these these certificates with timestamps. Um, you already mentioned that that somebody could basically arbitrage or use battery to to to do the different pricing So you envision a marketplace for these these certificates then.
27:40.40
Toby Ferenczi
Yeah that's a great. That's a great point. So yeah, once you've done your your baselining and that's actually the software that we provide. We provide some software to utilities that helps them essentially do baselines. Of ah twenty four seven for all of their customers by managing portfolios of their helping with the portfolio management of renewable energy certificates both the traditional rex and then these new timestamp wrecks um the next thing is okay. How do I go source from the market. Um.
28:14.93
Toby Ferenczi
And it's really interesting to think how these new certificates will be traded. What's interesting is like how the the way the certificates are traded today where timing doesn't even come into it. They're traded um by.
28:31.33
Toby Ferenczi
Ah, lot of the same people that trade carbon offsets and it's a fairly opaque market. It doesn't work like the power market at all. We think when you add a times stampmp to the certificates and um the timestamp matches the the delivery period and the power markets. So normally 1 hour or half an hour. Down to 5 minutes in certain places the way we trade these certificate stars so look a bit more like how we trade power today and the way we trade power is through a range of different venues. Um and different types of contracts depending on what we're looking to do so a lot of power is traded well ahead of time under forward contracts this is stuff you know Chris. And then as you get closer to the delivery period you want to shape your ah to to match your profile and then you need to and then you rely as you get closer to that that delivery period on centralized spot markets like the day ahead Auctions or the intraday markets. Um, and so we actually think you're going to start to see the emergence of of similar ah types of trading venues for these times some certificates and actually alignment between the power markets and the certificate markets themselves because when the certificates are based on the same metering data. As is used in the power market and you have the same timewind though you can actually start to use them as a common instrument and to sort of sketch out some of these ideas we've we partnered up with a company in Europe called nordpool which is one of the 2 main power market operators.
30:00.79
Toby Ferenczi
Um, and we are. We actually have an innovation project to to build 1 of the first or the first spot market for time stamped energy certificates and we we actually just published last month a ah white paper on exactly how we see this whole paradigm playing out which I I Really Recommend. Reading if you want to dive deeper into it so we'll share a link to that as well.
30:21.40
chrissass
So our our time stamp certificates if you do your job. Well do you put yourself out of business because if if we get to green energy in all energy produced becomes somewhat green I don't need the Providence of energy anymore because everything in the grade would be green.
30:35.21
Toby Ferenczi
Um, yeah.
30:38.61
Toby Ferenczi
Oh totally I love this question. Yeah, so basically what we're talking about is you know, getting to a a completely decarbonized electric grid and having electrified all of transportation industry. Heating and cooling. Um, and once you do that you address over eighty percent of global carbon emissions like that is the goal and the thing that matters most is is how quickly we get there right? like we we need to get there way faster than. We're currently moving. Um and so we need all the tools in the box and I think unless there is a mechanism for consumers to you know play their role and to be able to choose to buy energy essentially by tagging each unit of electricity on the grid. Um, you just there won't be the the sufficient incentives to get there because like you know it's 1 thing to get to get the first 30% of renewables on the grid but getting the last 30% of renewables on the grid is actually a lot harder because you've got all of the grid integration issues. Um, so we I don't think. Like you know some companies countries have targets of twenty thirty five I don't think that's likely if we do get there. It will only be because we introduce a system like this that allows consumers to to play their role and for you know policymakers to use such ah, an energy tagging system.
32:10.58
chrissass
So but just interrupt up work. You're using here that that are catching my attention right? So I I inadvertently said green which is probably is not right because you are talking about carbon capture and renewable right? So so those are 2 different things right? So early on you said solar wind. Yup.
32:12.93
Toby Ferenczi
Um, once you get there? yeah.
32:23.46
Toby Ferenczi
Um, yeah I will early unforended.
32:29.65
chrissass
Easy to understand if I have a gas turbine with the carbon capture capability. Do I get a certificate.
32:36.82
Toby Ferenczi
Oh yeah, ah so I'm not sure I mentioned carbon capture I said I think I said carbon free. We can hopefully talk about Yeah, that's that's like above my pay grade. Um.
32:39.36
chrissass
Carbon free. Okay, that's what I'm asking is carbon Capture count is is an acceptable way to get her certificate I Just curious.
32:52.62
Toby Ferenczi
So so as a platform we're agnostic so right? like and many of these targets are ah based on. They're very clear twenty four seven carbon free energy rather than twenty four seven renewable energy right? And I I think that makes ah of um.
33:02.89
chrissass
Okay, so it's it's about carbon right? It's about global warming is what with the target is.
33:10.21
Toby Ferenczi
That is that is the primary thing that people are interested in. Yeah um, and so and actually it's governments today who define what technologies can get a certificate and which can't right There's a lot of places where nuclear gets certificates. There's actually a few places where everything gets a certificate right? thermal. Gets a certificate so at least you you know whether you're buying coal or not right now in a lot of places you you know if you're buying renewable or not and then if it's not renewable. You just know it's gray right? There's brown power but you could actually use it to track every generation every unit from every generator on the system. That does happen in places like pam and Austria and and a few other places I mean I actually think that once you do get to a completely carbon free grid like you know the fact that we have a a system for tagging all units of energy is actually just going to be a very useful accounting system right? and. People make care of 1 flavor over another. It may just be a good way to like be able to compensate batteries for helping to balance the the system right? I think we'll find lots of uses for thesenew these digital energy tags. Um, once once we get to a carbon free grid but then it's all about. Helping us to get there quicker because otherwise we're we're all screwed.
34:27.31
chrissass
So how is this playing out across the world. So you have emerging markets. You've got developed nations. You got the eu United States where is this playing strong and and and where is this still a long way to go.
34:36.77
Toby Ferenczi
Um, yeah.
34:44.82
Toby Ferenczi
Um, yeah, it's a great great question. So like what are the what are the like bottlenecks to evolving these energy certificate systems. Um. So the the part of the mission of of energy tag which is now run by a great team in Brussels guy called Killian Daily is is in charge and ah this is a nonprofit standards body. It's not a technology It's not ah um, a so offering any kind of service. Um, but it provides a standard. So the tracking systems can start to energy super tracking systems can add that missing timestamp and so we can get a ah voluntary market for these certificates going without needing to wait for regulatory change. So. Obviously there's certain things regulations can do to help drive adoption and to shift the existing certificates but there aren't really any like regulatory barriers to getting this going from the beginning and in fact, what we're doing is by showing this like 500 organizations supporting energy tag and we want to show. But this is possible and that's going to kickstart the the regulations a lot of the renewable energy tracking systems. The people who issue certificates have already developed the capability to issue timestamped energy certificates in the us to the largest tracking system called emres um is ah is um, already doing this.
36:11.52
Toby Ferenczi
Um, pjm is the second largest tracking system they an announcedunce recently that they have the capability to issue timetamped energy certificates similarly in Europe and actually you'd be surprised in developing markets. You know there the their renewable energy sort of certificate systems are are very new. And in some cases they're they're still being implemented by governments and so there they actually have the choice to go and implement the old 20 the the 20 year old system or just leapfrog and go straight to the new system. Um, and so something they're looking, they're they're now aware of and and looking at very closely. Um, the pain point that we're solving actually is not on the the tracking system side. So the people who issue these certificates we notice that the the utilities many of them most of them actually are still using. Excel spreadsheets to manage their inventories of energy certificates. And we provide this kind of end-to-end certificate management tool that just makes it easier in their day-to-day jobs of managing these these existing certificates but then also enabling them to to give much more transparency to end customers even down to the hourly level. But these new timestamp certificates. So.
37:24.94
chrissass
And then so so it sounded like that one of your core customer demographics for your company is utilities um in in probably the early phases the the most effective.
37:34.96
Toby Ferenczi
Hell.
37:37.11
chrissass
Customer side would be enterprises right? So a larger to midsize Enterprise is going to make the biggest impact. Um, but they have a different mission statement. Maybe they're a producer. Maybe they're a bottling plant. Maybe they're doing something in their core competence. So how are they choosing to.
37:41.74
Toby Ferenczi
Um, yeah.
37:52.92
chrissass
Become energy specialists and make sure their energy is grain and still focus on their core business.
37:59.21
Toby Ferenczi
Yeah, no, that's a great question. Um I think it depends on the business. You know, very large businesses. Once you consume a certain amount of energy you get to a point where energy does become. Pretty cool need to be a pretty cool competency right? If you're smelting aluminum or ah aluminium as we say there? Um, it's a ah you know energy is like 1 of your biggest priorities right? like security of supply because if you'll you know you have a. Grid outage then it's like a $20000000 repair Bill. Um, and in terms of your overall costs your variable costs. It's like that's the main input so you'll see some companies like pharmaceuticals as well and now data center companies as well. They're building energy teams. That are really skilled in this and you know some of them may been trading. But that's the very minority the vast majority of businesses even ones with big energy demand still rely on their utility. They rely on the utility to um, sell them power to.
39:11.63
Toby Ferenczi
Um, balance their power right on the grid for them. Um, in all hours so utilities still play this really important role privileged role right of selling energy to just about everybody big companies down to individuals. Um, and. And their core competency is matching supply and demand on a twenty four seven basis so we think that they're they're also going to be the best place people to help um, match their you know customers' energy and needs with clean energy carbon freee energy on a twenty four seven basis um, but right now they haven't had the the right tools to do that. So so if if this is going to go mass market it needs to be easy right? You can't rely on businesses. Um, having you know whole energy teams with power traders. It needs to be really simple. And so they need utilities need to essentially be able to go to them with a very simple green offer. That says we will manage the complexity we will deliver you clean energy? Um, but then also you know be transparent about it show the. Customers actually where their energy is coming from and then the benefits that they're um, that are ah being created when they make that switch in terms of how they're reducing their carbon emissions. Um, and in terms of the impact on the overall system. Um, so we think utilities have a really important role.
40:44.73
Toby Ferenczi
Um, and um, you know the ones we're working with like over 20 utilities in 8 countries around the world and and those utilities are really waking up to their responsibility here. Um in the energy transition. Um, and at a large part is yeah, it's it's can to be selfish right? It's because they've got some customers yelling at them saying. We care about this. You know we need access to renewable energy. Um, and ah, you know what we're going to go move elsewhere if we can't access renewable energy from our our local utility.
41:16.38
chrissass
So you you mentioned about 20 companies using this. It's early early innings as I would like to say um so what keeps this from going mainstream if if there was a hurdle that you see ahead of you. What would keep this from actually developing.
41:32.34
Toby Ferenczi
Yeah, yeah, yeah, well I mean I I mean I'm obviously in a bubble but um, ah you know we're hearing a lot of positive noises. Um, you know we have a growing list of utilities.
41:34.17
chrissass
Way you describe this.
41:49.81
Toby Ferenczi
Um, ah, reaching out to us wanting to offer better so products for their customers growing lists of corporates that are signing up to things like the the un n united nations has something called the twenty four seven carbon-free compact which is an initiative to get more businesses aware of this issue. Um. So it's moving in the right directions but there are a few things that could really tip us over into you know or accelerate that that the adoption curve one that our highlight is to do with is something called the greenhouse gas protocol which is the. Um, accounting standard that the whole world is not specific to to the Us or europe or elsewhere any one country. It's a global standard that sets out how businesses should report on their carbon emissions and all of these other kind of reporting initiatives that you may have heard of like the. Sbti the sciencebase targets initiative or cdp they all follow what's written in the greenhouse gas protocol and that currently this called the scope 2 guidance are currently allows you to do this old system of annual matching to say hey I'm 0 carbonn in my energy consumption. Um. But that's under review there's ah there's a survey and a review process that's underway the consultation closed a few weeks ago and we're expecting kind of the the first announcements about it next year and it'll be finally implemented and not and not until 2025. So it's going to take some time. Um, but this.
43:24.60
Toby Ferenczi
Looks likely to change the current standard. We don't know what to, but certainly you know this twenty four seven is something that's being looked at very closely. Um and that could that would then create a requirement on all businesses. To change how they report the carbon emissions associated with their energy consumption which is becoming like as you can imagine a bigger and bigger piece of the the overall carbon emissions is like where is my electropate where is my electricity come from coming from. Um you know, particularly as they people electrify their transportation fleets as they. Electrification in other areas and so that would um, you know that would be a great help. Let's put it that way. We're tracking about 30 to 40 other regulatory processes which are all sort of supporting twenty four seven and timestamp energy still fits in some way. Um. But probably yeah one of the biggest or the most international one is that greenhouse gas protocol.
44:19.79
chrissass
And then my last questions we're starting to bump up against time is who ultimately pays for a service like your service. How does it get paid for.
44:30.74
Toby Ferenczi
Um, yeah, that's great. Well we're we're providing a piece of software that benefits utilities because it enables them to improve some of their efficiencies reduce some of their cost through automation. Um, and it also helps them to. Um, sell yeah better products which should you know some customers are are willing to pay right? that slight premium right? They shouldn't be paying more for renewable energy at those times when it's available. But you know they'll be paying for. Um. Ah, more transparency they'll be paying for their reports. We help them report the carbon emissions to those customers. Um, and so these ah can be higher margin products as Well. Um, and so but it's all based on Usage. So you know, only utilities only pay for it if it's actually being.
45:18.28
chrissass
Mr.
45:24.21
Toby Ferenczi
Being used at the end of the day but we're we're a software. We know we're we're providing ah you know a piece of software that has kind a very low cost in relation to the overall value that you know could potentially come from this transformation in terms of how energy is important. Thoughts and soul.
45:42.20
chrissass
All good I appreciated the explanation. Um, it's been a fun conversation I've enjoyed hearing a bit about the the changes in wrecks and in the markets that are developing and how you're helping encourage that um, any final thoughts before we wrap up today.
45:56.75
Toby Ferenczi
Um, so no I mean ah, first of all I really really appreciate this. Um, it's great. We really are trying to get the the word out there about because it's a renewable energy city like have been this kind of forgotten corner of the of energy markets. And what we're trying to do is is bring them back into the fold and have them play an even more important role than they have been previously by aligning them with with how power markets work and 1 interesting point to to leave you with is that globally there's a lot of discussion about how to change. Ah, how should we change electricity markets for the better um particularly with the crisis that we saw coming from russian invasion and Ukraine which caused electricity prices to spike um and cause a lot of pain to to industry. Um, there's been There's a lot of discussions on the table to reform electricity markets um to make them more resilient less dependent on natural gas prices. Um and to help create incentives for things like flexibility and so this is one of the key themes in that white paper with nordpool.
47:08.83
Toby Ferenczi
Um, is highlighted is these certificates can actually be used to as ah as ah, um, to achieve a lot of those stated policy goals when it comes to reforming electricity markets whether you want to create incentives for local consumption of renewable energy. Um, whether you want to create. Um. Incentives for carbon free forms of flexibility as opposed to incentives for gas turbines which currently benefit financially exactly the same in today's markets um so so we just want to put this on the radar. Um. Of policymakerrs and decision makers. Um, for yeah, this is a new instrument that's coming and use it to your advantage.
47:54.96
chrissass
Well Toby thank you so much for being a guest on the program today for audience. We hope you've enjoyed this episode. We've we've talked a bit about Rex over the past couple of years they can be contentious. You can see they can also be used for a catalyst for change.
47:59.91
Toby Ferenczi
Thank you so much for having me really appreciate it.
48:12.97
chrissass
Ah, we hope you've enjoyed this content if you had don't forget to subscribe follow us and share us with your friends. We'll talk to you again next time on Insider's guide to energy Bye Bye.